Same firm for books and the return, or keep them apart on purpose

Five years running my own shop and I've done it both ways. Two providers, and it's mostly about rate. My bookkeeper bills $55 an hour and my CPA's staff bills $145 for work that is functionally identical. On my volume that gap is about $6,000 a year.

The January handoff you're worried about is manageable if you make the bookkeeper produce what the preparer asks for in the format he asks for. I got the two of them on one call in November of my second year and it has been boring ever since. That call cost me $180 in billed time and saved more than that in the first year.

The $500 reduction in the return fee tells you something too. He's expecting real savings from clean books, which means he's currently spending hours on cleanup. I'd ask him what specifically he's fixing.

Worth separating the roles, because the words get used loosely.

A bookkeeper records transactions, reconciles bank and credit card accounts to statements, and produces financial statements. That is recordkeeping work and in most states it carries no license requirement.

A CPA or an enrolled agent is licensed and can prepare and sign returns and represent you before the tax authority. Enrolled agents are federally licensed, CPAs are licensed by state boards, and what each can do varies. A tax preparer's job starts from books that already exist. If those books are wrong, the preparer either fixes them, which is billed time, or files from numbers that don't hold up.

"Adjusting entries" are the corrections a preparer makes at year end to get the books onto the basis the return requires. Depreciation is usually one of them, since most bookkeeping software won't compute it for you correctly on its own. If those entries never get pushed back into your accounting file, your books and your return drift apart, which is a common source of confusion in year two.

On the question you actually asked, both arrangements are normal and the cost difference is the main thing you can measure. What you can't measure from outside is quality. Ask any prospective provider who does the depreciation schedule, who owns the accounting file if you leave, and whether adjusting entries get returned to your books. Get those answers in writing in the engagement letter. Which structure fits your entities and returns is a question for the licensed professional you hire.

The access question in @rena-guide's last paragraph is the one I'd nail down first. I've watched a friend try to leave a combined firm and discover the accounting subscription was under the firm's account, not his. He got a set of PDFs and started over.

Your $4,900 delta assumes the standalone bookkeeper at $210 is doing the same scope. Is she doing depreciation? Fixed asset schedules? Intercompany between the two entities? At $210 a month for six doors and two entities I'd guess she's doing categorization and reconciliation and nothing else, which means the CPA's $450 includes work you're currently paying for inside the $2,400 return fee. Redo the comparison with the return fee in it and the gap gets smaller than it looks.

@windlass is right about scope but the second pair of eyes point is still real to me. If one firm codes it and the same firm signs it, nobody in the chain has an incentive to question the coding.

I've got a service business on this side of it, so weigh that when you read this. What I've seen sell is exactly the arrangement @thatch describes, where the bookkeeper works to the preparer's specification. The client keeps the cheaper hours and the preparer stops eating cleanup.

The thing that makes it fail is when neither one will own the depreciation schedule. Bookkeeper says the CPA handles it, CPA assumes it's in the books, and two years later nobody can tell you accumulated depreciation per property without rebuilding it. Put that in writing with a name attached before you sign anything.

Naive question. If the CPA is doing the books all year, does he actually look at them monthly, or does he do twelve months of coding in one sitting in January and just call it bookkeeping? Because at $450 a month I'd want to know which one I'm buying.

@halyard that's the right question and the answer is often the second one. I paid a firm $400 a month for what turned out to be a quarterly sweep with a monthly invoice. Found out when I asked for a September P&L on October 6th and was told it would be ready "after the quarter is processed."

Small multifamily here, eleven units. I run two providers. The bookkeeper closes by the 10th and I read the statements the same week, which is the only reason I caught that one building's water bill had tripled after a slab leak. Nobody at a tax firm was going to call me about that in April.

Different situation on my side because land generates almost no transactions, so I do the books myself and buy the return only. Twenty minutes a month. The moment there's a partner in an entity I'd stop doing that, and @anchor has one, which is the detail I'd weigh heaviest here. Partner reporting has a way of turning a casual arrangement into a dispute.

Coming from construction, the analogy that helped me is that you don't hire the same guy to do the work and the inspection. Honesty isn't the concern here. A person stops seeing things after the fortieth time through the same file.

Still, on six doors, the amount of judgment in your books is small. Rents in, mortgage and taxes and insurance out, occasional repair or capital item where the coding matters. The judgment calls are the capital items, and those get decided by the preparer either way.

Two providers, and I'd pay the difference again. My bookkeeper answers texts at 7am. My CPA answers in four business days between February and April, which is exactly when I need something.